Xi’s push against Jack Ma is a new threat to China’s technology

Chinese tech companies did a great job of convincing global investors that they operated independently of the Communist Party. Now, Jack Ma has become a case study for the biggest skepticism of companies.

Companies ranging from Alibaba Group Holding Ltd. to Tennessee Holdings Ltd. acquired billions while developing apps and technologies that challenged Western rivals with little or no state intervention. But after the discovery of Beijing’s Ma and its Ant Group company, it directly hit the hands of China’s biggest critics in Washington, criticizing regulators, who have long claimed that no Chinese tech giants or The entrepreneur is not beyond President Xi Jinping’s reach.

US officials are now debating whether to ban investment in Alibaba and Tencent, according to people familiar with the matter, a dramatic setback for two of the companies whose shares are widely regarded by global investors as the most widespread Are kept from Already on January 5, President Donald Trump signed an executive order banning transactions with eight Chinese software applications, including Ant’s Alipay, and Tencent’s WeChat Pay, citing concerns that Beijing would have platforms Will have access to the data collected by. “I stand with President Trump’s commitment to protect the privacy and security of Americans from danger by the Chinese Communist Party,” Commerce Secretary Wilbur Ross said in a statement on the order.

Beijing’s move could put pressure on the Joe Biden administration for China to take further action, though it is unclear how much of Trump’s aggressive policies will continue the presidential election.

The party’s stranglehold over the past 12 months has become even clearer as Xi insisted on consolidating power ahead of next year’s big party Congress, when he hoped to extend his rule for at least five years. . COVID-19 has only served to strengthen its grip, giving rise to a war-like campaign to get the economy back on track and realizing perceived threats to national security.

“You finally need to be very careful of the people who control the license, the rules that govern it,” said Mark Natkin, managing director of Beijing-based Marbridge Consulting. “And if you forget and you start being overly serious or take on too much of a role that belongs to the party in general, you’ll cut a notch or two.”

Since demolishing Ant’s $ 35 billion public offering in November, Beijing has radically moved overhaul Ma’s trillion-dollar internet empire, a record-breaking debut that was the entrepreneur’s crowning achievement . The authorities then forced their online finance titans to cap loans and formulated plans to close their most lucrative businesses. The government also launched an investigation into alleged anti-Semitism practices on Alibaba. The billionaire has not been seen publicly since November and his absence from a recent taping of the African TV program sparked speculation about his whereabouts.

“The Chinese government’s economic and financial management infrastructure has a lot of power, and if Ant was going to destroy that power, important people would see it as a move,” said DigiChina Project Editor Graham Webster of Stanford Cyber Policy Center. But “the Chinese government rewarded these leading companies as drivers of technological freedom.” The party must face significant threats to tear them down. “

Action against Ma sends the latest indication that Beijing feels the risk of international decline by measures to address domestic challenges. Xi has previously avoided the dangers of US sanctions on the former British colony of Hong Kong to enforce comprehensive national security legislation. Crushing Ant’s IPO risked Carlyle from Singapore’s sovereign wealth fund alienating a pile of powerful global financiers.

The US cites concerns about the Chinese government’s influence on private industry to justify its efforts to force ByteDance Ltd to sell its US portion of the Ticketok social network and convince affiliates globally Such actions often cite Chinese policies such as the 2017 law that require companies to “assist, assist and cooperate” with intelligence agencies, such as swearing devices made by supporters of Huawei Technologies.

Like Huawei, Ant also said in a 2017 application to the US government’s securities regulator that it asserts its independence from the Chinese government that it is “a private-sector company and a handful of Chinese state-owned or unaffected funds.” Has non-controlling minorities. ” The stakes, they do not participate in company management. “

The party has long ventured into private firms, including foreigners operating in China. One way is through the presence of party committees in companies, technical enterprises among them, which are made up of employees.

In addition, it sends officers to companies to oversee certain activities. Many tech leaders are also party members, including Ma, Lenovo founder Liu Chuanzhi and Huawei’s Ren Zhengfei. Pony Ma of Tencent and Lei Jun of Xiaomi Corp are both representatives of the National People’s Congress.

The party stepped in on several occasions to punish officials for mismanagement, including Wu Xiaohui of Anbang Insurance Group.

But recent efforts to increase the government’s influence on companies and to interfere with the business landscape have reached new levels. Chinese hawkers in Washington provide fuel, which argues that the party exerts great influence on Chinese companies.

Xi needs business executives on his part to achieve strategic goals, such as “dual-proliferation” economic planning, focusing on domestic consumption, developing safe supply chains, and reducing dependence on foreign technology. While the world’s second-largest economy was the first to rebound from COVID-19, its recovery is signaling a peak as global growth remains sluggish and relations with the US remain.

In a rare direct plea to the business sector in July, Xi called on officials, including tech industry officials, to be patriotic and help with the epidemic economic recovery. “Excellent entrepreneurs must have a strong sense of mission and responsibility for the nation, and align the development of their businesses with the prosperity of the nation and the happiness of the people,” he said.

Weeks later, the party revealed plans to consolidate control over the private sector by furthering its United Front networking functions in the business community. According to timely published guidelines, the policy “will strengthen ideological guidance” and “constitutes a core group of private sector leaders who can be trusted during critical times”.

“Under President Xi, the CCP has tightened its grip on tech companies and doubled down on its techno-nationalist initiative,” researcher Alex Capri wrote in a recent report for the Hinrich Foundation. “In addition to placing party officials within major companies, this continues to be for high-profile corporate executives, where there is a perception that they were acting independently of the party’s directive or becoming very influential.”